The paragraph introduces a conference call for Cboe Global Markets' first quarter earnings, moderated by Kate, the conference operator. Ken Hill, the Treasurer and Head of Investor Relations, introduces the key speakers: Fred Tomczyk, CEO, and Dave Howson, Global President, who will discuss quarterly performance and strategic initiatives, followed by CFO Jill Griebenow's overview of financial results and a 2025 outlook. The call will conclude with a Q&A session, also featuring COO Chris Isaacson. The presentation includes slides available on their website. The remarks will include forward-looking statements, which are subject to risks and uncertainties, meaning actual outcomes may differ.

In the conference call, Fred Tomczyk expressed support for Craig Donahue's appointment as Cboe's new CEO, highlighting Donahue's experience and industry respect. Tomczyk announced that Cboe experienced strong financial results in the first quarter, with net revenue increasing by 13% to $565 million and adjusted diluted earnings per share rising by 16% to $2.50. Growth was driven by high volumes in derivatives, cash and spot markets, and global expansion of the DataVantage business, along with disciplined expense management.

The derivatives business experienced a strong quarter, with a 16% increase in organic net revenue year over year, driven by high demand for VIX and S&P 500 index options due to market volatility and geopolitical events. The SPX and XSP contracts saw significant growth in average daily volume (ADV), and the volatility product suite performed well, with notable increases in VIX options and futures ADV. The continued market uncertainty, influenced by tariff announcements, also bolstered the start of the second quarter. Additionally, the DataVantage business and cash/spot markets showed solid performance, with respective year-over-year net revenue increases of 8% and 10%, contributing to overall strong transaction and non-transaction revenue growth for the quarter.

The company is focused on executing its long-term strategy by investing in core business growth, expanding global derivatives, and increasing recurring revenue through DataVantage. They aim to leverage their global network and technology to drive product reach and access, particularly for the US capital market. There's significant growth potential in the Asia Pacific region, especially for index option products which provide exposure to the US market. They've onboarded new clients in Korea and Taiwan and aim to enhance DataVantage's role in facilitating access. Interest in European market data among Asian clients highlights their global network's strength. The company remains committed to product innovation and making US markets more accessible to international investors.

The company continues to expand access to the US markets and strengthen its presence globally by completing its final equities exchange migration to the Cboe Titania technology platform, ensuring resilience and reliability during market turbulence. They are committed to investing in durable technology to support market operations and innovation. Dave Howson reports strong performance in the derivatives business with a 16% increase in net revenues to $309 million in Q1, driven by record activity in options trading. This growth was propelled by increased geopolitical volatility, leading investors to utilize options for navigating uncertainty. SPX options volumes rose 13% year-over-year, while VIX options volumes increased by nearly 33%, and there was significant growth in zero DTE options trading.

The paragraph discusses the impact of market volatility and expanded trading access on zero-day option volumes, which reached record levels in early 2023. It highlights the significant increase in trading during both global trading hours and following major news events. The trading platform, Robinhood, contributed to this by offering index options to all customers. Additionally, growth is noted in new products, particularly Bitcoin index options and ETF strategies, as well as corporate bond futures. Both the Bitcoin index options and bond futures have seen record levels of interest and trading volumes, with expectations of continued growth due to increased market volatility.

The paragraph highlights the strong performance and technological capabilities of Cboe at the start of the year. It discusses the increased use of options by investors in response to elevated volatility and market conditions. Notably, SPX option volumes reached a record high, and first-quarter revenue grew by 10% with contributions from all regions. The successful migration of Cboe Canada to the Cboe Titanium platform means all their markets across various regions are now integrated, underscoring the platform's resilience and capacity to handle large trading volumes. North American equities saw a 2% increase in net revenue despite lower transaction fees, showcasing Cboe's strength in the current market environment.

In the US, Cboe experienced healthy industry activity levels, but its addressable market was smaller due to increased off-exchange and auction transactions. Despite this, Cboe saw strong growth in non-transaction segments, particularly in Europe and Asia Pacific, with an 18% year-over-year increase in Q1, driven by rising transaction and clearing fees. DataVantage's net revenue grew over 8%, with a notable 47% rise in new recurring annual contract value, indicating positive business trends. More than half of new data sales occurred outside the US, and Cboe is enhancing its sales force and market intelligence in the APAC region to capitalize on growing global investor demand.

The paragraph discusses Cboe's strong financial performance in the first quarter, highlighting a 16% year-over-year increase in adjusted diluted earnings per share to $2.50. Net revenue rose by 13% to $565 million, with growth across all business segments: derivatives markets (16%), cash and spot markets (10%), and DataVantage (over 8%). Despite stable operating expenses of $192 million, the company achieved a 20% rise in adjusted operating EBITDA to $385 million, with the EBITDA margin increasing by 4.3 percentage points to 68.1%. These results exemplify the strength of Cboe's model and its global market expansion efforts.

The paragraph provides an overview of the financial performance of different business segments. The options segment reported record net revenue with notable increases in options ADV, index options volume, and multi-listed options volume. North American equities saw a 2% rise in net revenue, despite a decline in transaction and clearing fees. The Europe and APAC segment achieved record net revenue growth, driven by increases in transaction and non-transaction revenues. Futures and Global FX segments also reported revenue growth, supported by higher transaction and clearing fees. The DataVantage business saw an 8% organic increase in net revenues, attributed to an expanded product set and global sales presence. Total adjusted operating expenses remained stable at $192 million, with reductions in certain expenses offset by increases in technology and depreciation costs.

The company is maintaining its full-year expense guidance between $837 million and $852 million, despite favorable first-quarter results, due to anticipated increases in marketing costs, short-term incentives, and expenses related to a CEO transition. They are also investing in global sales and marketing enhancements while maintaining operational efficiency. For 2025, they have raised their full-year organic net revenue growth forecast to mid to high single digits. The DataVantage organic net revenue growth guidance remains the same, and they reaffirm their expense guidance for the year. Capital expenditures are projected to be $75 million to $85 million, and depreciation and amortization are expected to range from $55 million to $59 million. The effective tax rate is anticipated to be between 28.5% and 30.5%.

The paragraph outlines the financial position and activities of a company, highlighting its expectation of net interest expense between $2 million to $3 million in Q2 2025. It boasts a strong balance sheet with over $1 billion in adjusted cash, favorable debt terms, and low leverage. The company actively repurchased shares totaling $35 million and paid a $66 million dividend in Q1. It aims to leverage its financial health for sustained shareholder returns. Fred Tomczyk acknowledges a strong start to the year and expresses optimism for future growth under the leadership of new CEO Craig Donahue, who brings significant experience from his time at CME.

The paragraph describes the transition in leadership at a company, where the current CEO, who moved from the board eighteen months ago, will pass the role to Craig on May 7 and transition to an advisory position until June. The outgoing CEO expresses pride in the achievements during their tenure, including stabilizing the organization and improving strategic focus, capital allocation, and leadership development. They express confidence in Craig and the management team to continue the company's success. The paragraph concludes with the outgoing CEO handing over to Ken for a Q&A session, where Patrick Moley asks about the CEO search process and the decision to choose Mr. Donahoe, highlighting his skills and qualities. Fred Tomczyk then acknowledges Patrick and addresses the pronunciation of Donahoe's name.

The paragraph discusses the Cboe board's careful and disciplined process in selecting a new leader, considering both internal and external candidates. Craig was chosen due to his extensive experience and reputation. In a subsequent conversation, Fred Tomczyk, in response to Citigroup's Chris Allen, highlights Cboe's strong balance sheet and disciplined capital allocation. He emphasizes the company's focus on organic growth, capital returns, and the consideration of inorganic growth opportunities, which attracted Craig to the role.

The paragraph discusses the focus on the company's growth strategy under new leadership, emphasizing a balance between organic and inorganic growth that aligns with strategic and financial objectives to enhance long-term shareholder value. During a Q&A session, Ben Budish from Barclays inquires about the retail sector's performance, specifically mentioning Robinhood's faster-than-expected adoption of index options and robust SPX volumes. Dave Howson responds, noting significant engagement in Q1, particularly with SPX, and highlights that retail behavior has been disciplined, with 95% of their trades involving SPX zero DTE strategies that cap risk by defining the maximum loss at the trade's entry.

The paragraph discusses retail investors' behavior during periods of extreme market volatility, indicating that they remain disciplined and engaged, which results in them contributing less to the volume spikes during these periods. Historically, retail investors tend to return after volatility subsides, as observed during events like COVID-19 and in recent months. The exchange perspective aligns with customer feedback that retail investors have been successful and engaged from Q1 into Q2 and are expected to continue participating actively. The conversation transitions to a focus on Asia as a growth area, highlighting the company's increased investment in the region, including sales efforts and platform expansion, with notable growth in data sales and consumption, especially in the Asia Pacific, showing strong interest in trading.

The paragraph discusses strong demand for data products like ACV and DataVantage in the Asia Pacific region, with notable onboarding in countries such as Korea, Taiwan, Thailand, and Malaysia. Cboe is capitalizing on this demand by investing in sales and marketing efforts, including placing natural language speakers across the region and focusing on digital marketing channels. They emphasize educational and market intelligence initiatives, hiring experts to promote their products. The paragraph also highlights both direct and indirect engagement with local markets, such as Korean customers launching buffer protect products. Despite optimism about their outlook, there is a note that Cboe's index volumes in Q2 are not growing as rapidly as other markets like equities and futures.

In the paragraph, Dave Howson discusses the engagement and market share of SPX options, noting that institutional investors become more active during periods of extreme volatility to adjust and reposition their portfolios. He highlights that SPX options maintain strong market share compared to other S&P complex options like e-mini and SPY options. Howson also mentions the current economic uncertainties and elevated VIX term structure as factors necessitating portfolio hedge management. Additionally, Kyle Voigt from KBW asks about the company's capital return strategy, particularly the light buyback activity in the quarter, and inquires about future plans given the current leverage and cash on the balance sheet. Jill Griebenow responds by acknowledging the question.

The paragraph discusses a company's approach to share repurchases and capital allocation. In the first quarter, the company was opportunistic with repurchases but was restricted from the market until February 7 due to their earnings call. They aim to repurchase shares while the stock is doing well, reaching an all-time high in 2025, and they have the flexibility to buy back shares if the price weakens. The company prioritizes share repurchases over deleveraging, given their low leverage ratio and existing debt at favorable terms. Additionally, during the Q&A, Ashish Sabadra from RBC inquires about trends in Zero DTE (days to expiration) volumes, which have increased significantly, and its impact, particularly with changes in the VIX and the growing interest from retail and institutional investors. Dave Howson responds, noting significant growth since launching Tuesday and Thursday expirations for SPX.

The paragraph discusses the growth and engagement in zero days to expiration (DTE) options for SPX, XSP, and Russell, which saw increases of 29%, 50%, and 59% year over year, respectively, in Q1. Investors are increasingly using these short-term options to manage risk due to evolving news and macroeconomic conditions. While there are variations depending on market volatility, zero DTE options remain popular for their liquidity and ability to hedge positions. The ecosystem is described as robust and balanced, with a healthy put-call ratio around one. The paragraph concludes with a positive outlook on the growth and engagement in zero DTE options, emphasizing international user growth and new use cases.

In the paragraph, Jill Griebenow discusses Cboe's option on trading technologies, clarifying that the option has not been exercised or expired and that she can't provide further details beyond strategic and financial considerations. A question from Brian Bedell at Deutsche Bank shifts the focus to Dave Howson, who comments on DataVantage's robust growth, with over 8% increase in the first quarter and 47% growth in ATB. He mentions the positive indicators for organic revenue growth, despite uncertainties in the macroeconomic environment.

The paragraph discusses the company's optimistic outlook for the rest of the year, focusing on opportunities for international organic growth and product innovation in retail options. They intend to update their guidance quarterly. Owen Lau from Oppenheimer asks about the company's expense guidance, particularly regarding compensation and marketing expenses. Jill Griebenow responds by explaining that the current expense guidance is appropriate and aligns with their initial estimates. She mentions that the strong performance in the first quarter and April might lead to an increase in short-term incentive accruals, but this is accounted for within their existing expense guidance.

In this discussion, Michael Cyprys from Stanley inquires about the potential for expanding ZeroDTE success to intraday options and seeks insights on retail market strategies. Dave Howson responds by indicating that while intraday options are a topic of conversation, there is no active pursuit of them currently due to solid potential in existing volatility tools. Howson expresses excitement about the disciplined and thoughtful approach retail investors are taking, especially in high volatility situations, and emphasizes the ongoing development of retail strategies within their current toolkit.

The paragraph discusses the expanding use of various financial instruments and ecosystems in retail trading, emphasizing the growth in options strategies beyond just SPX, including VIX options and XSP. It highlights developments in crypto trading, such as Bitcoin ETFs and their associated options, along with the introduction of Cboe FTSE Bitcoin index futures. Additionally, it mentions plans to migrate digital futures to CFE and explores interest in the prediction market, particularly in sports, while maintaining discussions with customers and regulators to develop a reliable and transparent ecosystem.

In this paragraph, Madeline Daleiden asks about changes in open interest trends in the VIX franchise following early April volatility, mentioning potential shifts in institutional or retail behavior or deleveraging. Dave Howson responds that while specific interest details aren't immediately available, there has been strong engagement in VIX options and futures, particularly in Q1. Customers have been using fixed call and call spreads to manage risk, with subsequent monetization and hedging adjustments in April. Howson emphasizes that the key is the flexibility in moving between different products and tools based on market conditions. Then, Anthony Corbin from Goldman Sachs inquires about the competitive landscape for index options amid new developments like Nasdaq's single stock zero-day options, asking how Cboe maintains its competitive edge.

The paragraph discusses the richness and depth of liquidity in the volatility toolkit offered by the company, emphasizing the complementary nature of products like VIX and SPX, along with new additions like Verits, futures, and VIX options on futures. It highlights the vast institutional assets benchmarked to the S&P 500, which necessitate careful management. The company takes pride in the mature ecosystem they've developed, both electronically and on the trading floor, which supports diverse use cases and is difficult to replicate. The ecosystem's balance allows for continuous innovation, as different users and use cases adapt and evolve, supported by disciplined risk management. The paragraph concludes with an emphasis on the strength and innovation of the platform, positioning the company to continue evolving.

The paragraph discusses the trend of capital flowing into regions outside the US, such as Europe and Asia, while still emphasizing the importance of US market exposure. Dave Howson addresses the global growth in market data demand, particularly in the Asia Pacific region, and highlights the international revenue contributions of S&P 500 companies. He reassures that the company is well-prepared for these trends, citing global trading hour support and continued customer investment. Fred Tomczyk concludes the discussion by expressing satisfaction with the company's recent performance and announcing his return to the board, remaining optimistic about Cboe's future.

The paragraph highlights the company's strong management, strategic focus, and financial health while announcing the appointment of Craig Donahue as a successor. It concludes with well-wishes and ends the call.

This summary was generated with AI and may contain some inaccuracies.